Retailers score victory in government-wide spending bill that will force online marketplaces like Amazon and Facebook to vet high-volume sellers on their platforms amid heightened concerns about crime in retail trade.
Tucked into the $1.7 trillion funding package is a bill that brick-and-mortar retailers have been pushing Congress to pass for more than a year, as part of an effort to reduce the quantity of goods stolen from their stores and resold online.
The bill, called INFORM ACT, also aims to combat the sales of counterfeit and unsafe products by requiring online marketplaces to verify different types of information – including bank account, tax identification number and contact information – for sellers who make at least 200 unique sales and earn at least $5,000 in a given year.
It’s difficult to analyze how much money retailers are losing to organized retail crime – or whether the problem has grown significantly. But the issue has received more attention in recent years as high-profile retail thefts and mass shoplifting have captured national attention. Some retailers have also said in recent weeks that they are seeing more items pulled from stores.
Target executives said in November the number of thefts had increased by more than 50%, resulting in losses of more than $400 million. It is expected to be over $600 million for the full year.
And in an interview with CNBC earlier this month, Walmart CEO Doug McMillon noted that theft at Walmart is higher than it always has been, and could lead to higher prices and store closures if it persists.
Meanwhile, Joe Parisi, president and chief operating officer of New York grocery chains D’Agostino’s and Gristedes, said the chains are battling rising costs due to higher levels of organized crime, and that they had to double the security guards in stores from a year ago. Walgreens, Best Buy and Home Depot have also reported similar issues.
The National Retail Federation, the nation’s largest retail group, said its latest safety survey of about 60 retailers found that inventory loss – called shrinkage – has reached an average rate of 1 .4% last year, accounting for $94.5 billion in losses.
Shrinkage measures losses from sources other than external theft, including employee theft and product damage. Most of the shrinkage – 37% – came from external theft, including products taken at organized shoplifting events, the trade group said. He also noted that retailers, on average, saw a 26.5% increase in organized theft incidents last year.
The funding package that contains the bill to tame the problem was passed by the US House on Friday. It is now up to President Joe Biden to be signed into law.
Amazon, Ebay and Etsy initially opposed the verification bill, saying it would harm seller privacy and favor brick-and-mortar retailers over their online competitors. Online marketplaces then backed the legislation after a few changes, including changes to limit the number of sellers disclosing their details to customers to those earning $20,000 or more in annual income.
Under the bill, customers can obtain a seller’s name, phone number, email address and physical address, with some exceptions to protect merchants selling goods away from home . The bill states that sellers are not required to disclose their home address or phone number, provided they respond to customer questions via email or other forms of online messaging provided by the market.
The federal bill would also replace similar state laws, a win for e-commerce sites that no longer have to deal with a patchwork of state-level requirements.
Meta, which operates Facebook Marketplace, did not respond to a request for comment on the bill.
AP Business Writer Anne D’Innocenzio contributed to this report.